Also known as: unfunded life insurance trusts
Written by attorneys — see sources below.
A trust created during the settlor's lifetime to hold life insurance policies on the settlor's life. The settlor retains ownership rights in the policies, leaving the trust unfunded until the policies pay out at death. A will may validly pour assets into the trust even though the trust corpus is minimal or nonexistent at the time of the will's execution.
Ursula Upton created a written unfunded life insurance trust naming her brother as beneficiary and her friend as trustee. She purchased a policy that named the trust as beneficiary. Two years later Ursula executed a will that devised her stock options to the same trust. After Ursula's death the court upheld the devise because the trust had been established in a written instrument before the will and was properly identified in it.
Umar Underwood executed a trust instrument that named a life insurance policy as its sole asset and reserved to himself complete ownership and control of the policy. The trust remained unfunded during Umar's life. After Umar died without revoking the trust the insurer paid the proceeds to the trustee, who then administered the assets according to the trust terms rather than through probate.
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View caseYes. The governing statute expressly permits a will to devise property to the trustee of a trust established during the testator's lifetime, including a funded or unfunded life insurance trust, provided the trust is identified in the will and its terms appear in a separate written instrument.
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The devise to the trust lapses unless the will provides otherwise. The statute states that revocation or termination of the trust before the testator's death causes the devise to lapse.
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Yes. The statute provides that the devise remains valid even if the trust is amended after the will's execution or after the testator's death, and the poured-over assets are administered under the amended terms.
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No. The statute expressly validates pour-over devises to unfunded life insurance trusts even when the settlor retains all ownership rights in the policies and the trust corpus is minimal or nonexistent until death.
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…may be made in form or in substance to the trustee in accordance with the terms of a written inter vivas trust, including an unfunded life insurance trust although the settlor has reserved all rights of ownership in the insurance contracts, if the trust instrument has been executed and is in existence prior to or contemporaneously with the…